I, Pencil

There is no better, more easily understood, and more fun
explanation of the complexity of markets than Leonard
Read's “I, Pencil.” It ought to give considerable pause when
we listen to the arrogance of politicians who tell us they
can manage an economy better than millions, perhaps
billions, of independent decision makers in pursuit of their
own goals. Its message to would-be planners is to bug out!

WALTER E. WILLIAMS

PROFESSOR OF ECONOMICS • GEORGE MASON UNIVERSITY

7, Pencil” is a superb case study of free markets in action.
Half of the world’s economic problems would vanish if
everyone would read 7, Pencil."

BURTON W. FOLSOM

PROFESSOR OF HISTORY • HILLSDALE COLLEGE

What have economists contributed to human knowledge?
Plenty, but the magical, beautiful idea of the division of
labor might rank as the most important insight. 7, Pencil"
explains we create so much more wealth as a community
than we ever could alone - in fact, even the simplest item
cannot be made without a complex division of labor.

JEFFREY A. TUCKER

DIRECTOR OF DIGITAL DEVELOPMENT • FEE

"I, Pencil" provides remarkable insights into the complexity
generated by market mechanisms. Textbook economics
almost never incorporates these insights.

MICHAEL STRONG

CO-FOUNDER • CONSCIOUS CAPITALISM
CEO • RADICAL SOCIAL ENTREPRENEURS

XzQ, RzHVCaI

FEE’S mission is to inspire, educate, and
connect future leaders with the economic,
ethical, and legal principles of a free society.

Join us online at:

FEE.org

Facebook.com/FEEonline
Twitter.com/FEEonline (@feeonline)

Foundation for Economic Education

1819 Peachtree Road NE, Suite 300
Atlanta, Georgia 30309
Telephone: (404) 554-9980

Print ISBN: 978-1-57246-043-0
Ebook ISBN: 978-1-57246-042-3

Published under the Creative Commons
Attribution 4.0 International License.

First printing: May 2015
Second printing: May 2016

Cover design by Crowdskout
Print layout design by Lauren Hicks

FOUNDATION/or
ECONOMIC EDUCATION

We invite you to advance liberty with us.

VISIT FEE.org

kzQ, Rz/WCaJ

My Family Tree as Told to

Leonard E. Read

This printing was made possible through the generosity of
The Ralph Smeed Private Memorial Foundation.

Introduction

BY LAWRENCE W. REED

Eloquent. Extraordinary. Timeless. Paradigm-shifting. Classic.
Six decades after it first appeared, Leonard Read's "I, Pencil" still
evokes such adjectives of praise. Rightfully so, for this little essay
opens eyes and minds among people of all ages. Many first-time
readers never see the world quite the same again.

Ideas are most powerful when they're wrapped in a
compelling story. Leonard's main point — economies can hardly
be "planned" when not one soul possesses all the know-how and
skills to produce a simple pencil — unfolds in the enchanting
words of a pencil itself. Leonard could have written "I, Car" or "I,
Airplane," but choosing those more complex items would have
muted the message. No one person — repeat, no one, no matter
how smart or how many degrees follow his name — could create
from scratch a small, everyday pencil, let alone a car or an airplane.

This is a message that humbles the high and mighty. It
pricks the inflated egos of those who think they know how to
mind everybody else's business. It explains in plain language why
central planning is an exercise in arrogance and futility, or what
Nobel laureate and Austrian economist F. A. Hayek aptly termed
"the pretence of knowledge."

Indeed, a major influence on Read's thinking in this regard
was Hayek's famous 1945 article, "The Use of Knowledge in
Society." In demolishing the spurious claims of the socialists of the
day, Hayek wrote, "This is not a dispute about whether planning
is to be done or not. It is a dispute as to whether planning is to be
done centrally, by one authority for the whole economic system,
or is to be divided among many individuals."

Maximilien Robespierre is said to have blessed the horrific
French Revolution with this chilling declaration: "On ne saurait
pas faire une omelette sans casser des oeufs." Translation:
"One can't expect to make an omelet without breaking eggs."

A consummate statist who worked tirelessly to plan the lives
of others, he would become the architect of the Revolution's
bloodiest phase — the Reign of Terror of 1793-94.

Robespierre and his guillotine broke eggs by the thousands
in a vain effort to impose a utopian society with government
planners at the top and everybody else at the bottom. That French
experience is but one example in a disturbingly familiar pattern.
Call them what you will — socialists, interventionists, collectivists,
statists — history is littered with their presumptuous plans for
rearranging society to fit their vision of the common good, plans
that always fail as they kill or impoverish other people in the
process. If socialism ever earns a final epitaph, it will be this: Here
lies a contrivance engineered by know-it-alls who broke eggs with
abandon but never, ever created an omelet.

None of the Robespierres of the world knew how to make a
pencil, yet they wanted to remake entire societies. How utterly
preposterous, and mournfully tragic! But we will miss a large
implication of Leonard Read's message if we assume it aims only
at the tyrants whose names we all know. The lesson of “l, Pencil"
is not that error begins when
the planners plan big. It begins
the moment one tosses humility
aside, assumes he knows the
unknowable, and employs
the force of the State against
peaceful individuals. That's not
just a national disease. It can be
very local indeed.

In our midst are people
who think that if only they had
government power on their side,
they could pick tomorrow's winners and losers in the marketplace,
set prices or rents where they ought to be, decide which forms
of energy should power our homes and cars, and choose which
industries should survive and which should die. They should stop
for a few moments and learn a little humility from a lowly writing
implement.

In our midst are
people who think
that If only they had
government power
on their side, they
could pick
tomorrow’s winners

and losers... 99

2

While “I, Pencil” shoots down the baseless expectations for
central planning, it provides a supremely uplifting perspective of
the individual. Guided by Adam Smith’s “invisible hand” of prices,
property, profits, and incentives, free people accomplish economic
miracles of which socialist theoreticians can only dream. As the
interests of countless individuals from around the world converge
to produce pencils without a single “master mind,” so do they also
come together in free markets to feed, clothe, house, educate, and
entertain hundreds of millions of people at ever higher levels.

With great pride, FEE publishes this new edition of “I,
Pencil” to mark the essay’s timeless message for a new generation.
Someday there will be a centennial edition, maybe even a
millennial one. This essay is truly one for the ages.

- Lawrence W. Reed

President, FEE
Atlanta, Georgia
May 2015

3

I, Pencil

My Family Tree as told to Leonard E. Read

I am a lead pencil — the ordinary wooden pencil familiar to
all boys and girls and adults who can read and write.

Writing is both my vocation and my avocation; that's all I do.

You may wonder why I should write a genealogy. Well, to
begin with, my story is interesting. And, next, I am a mystery
— more so than a tree or a sunset or even a flash of lightning.
But, sadly, I am taken for granted by those who use me, as if I
were a mere incident and without background. This supercilious
attitude relegates me to the level of the commonplace. This is a
species of the grievous error in which mankind cannot too long
persist without peril. For, the wise G. K. Chesterton observed,
“We are perishing for want of wonder, not for want of wonders."

I, Pencil, simple though I appear to be, merit your wonder and
awe, a claim I shall attempt to prove. In fact, if you can understand
me — no, that's too much to ask of anyone — if you can become
aware of the miraculousness
which I symbolize, you can help
save the freedom mankind is
so unhappily losing. I have a
profound lesson to teach. And I
can teach this lesson better than
can an automobile or an airplane
or a mechanical dishwasher
because — well, because I am
seemingly so simple.

Simple? Yet, not a single
person on the face of this
earth knows how to make me. This sounds fantastic, doesn't it?
Especially when it is realized that there are about one and one-
half billion of my kind produced in the U.S.A. each year.

Pick me up and look me over. What do you see? Not much

4

66

If you can
become aware of
the miraculousness
which / symbolize,
you can help
save the freedome
mankind is so
unhappily losing.

meets the eye — there's some wood, lacquer, the printed labeling,
graphite lead, a bit of metal, and an eraser.

INNUMERABLE ANTECEDENTS

Just as you cannot trace your family tree back very far, so is
it impossible for me to name and explain all my antecedents. But
I would like to suggest enough of them to impress upon you the
richness and complexity of my background.

My family tree begins with what in fact is a tree, a cedar of
straight grain that grows in Northern California and Oregon. Now
contemplate all the saws and trucks and rope and the countless
other gear used in harvesting and carting the cedar logs to the
railroad siding. Think of all the persons and the numberless skills
that went into their fabrication: the mining of ore, the making of
steel and its refinement into saws, axes, motors; the growing of
hemp and bringing it through all the stages to heavy and strong
rope; the logging camps with their beds and mess halls, the
cookery and the raising of all the foods. Why, untold thousands of
persons had a hand in every cup of coffee the loggers drink!

The logs are shipped to a mill in San Leandro, California.
Can you imagine the individuals who make flat cars and
rails and railroad engines and who construct and install the
communication systems incidental thereto? These legions are
among my antecedents.

Consider the millwork in San Leandro. The cedar logs are
cut into small, pencil-length slats less than one-fourth of an
inch in thickness. These are kiln dried and then tinted for the
same reason women put rouge on their faces. People prefer that
I look pretty, not a pallid white. The slats are waxed and kiln
dried again. How many skills went into the making of the tint
and the kilns, into supplying the heat, the light and power, the
belts, motors, and all the other things a mill requires? Sweepers
in the mill among my ancestors? Yes, and included are the men
who poured the concrete for the dam of a Pacific Gas & Electric
Company hydroplant which supplies the mill's power!

Don't overlook the ancestors present and distant who have a

5

hand in transporting sixty carloads of slats across the nation.

Once in the pencil factory — $4,000,000 in machinery and
building, all capital accumulated by thrifty and saving parents
of mine — each slat is given eight grooves by a complex machine,
after which another machine lays leads in every other slat, applies
glue, and places another slat atop — a lead sandwich, so to speak.
Seven brothers and I are mechanically carved from this “wood-
clinched'' sandwich.

My “lead" itself — it contains no lead at all — is complex. The
graphite is mined in Ceylon [Sri Lanka]. Consider these miners
and those who make their many tools and the makers of the paper
sacks in which the graphite is shipped and those who make the
string that ties the sacks and those who put them aboard ships
and those who make the ships. Even the lighthouse keepers along
the way assisted in my birth — and the harbor pilots.

The graphite is mixed with clay from Mississippi in which
ammonium hydroxide is used in the rehning process. Then
wetting agents are added such as
sulfonated tallow — animal fats
chemically reacted with sulfuric
acid. After passing through
numerous machines, the mixture
finally appears as endless
extrusions — as from a sausage
grinder — cut to size, dried, and
baked for several hours at 1,850
degrees Fahrenheit. To increase
their strength and smoothness
the leads are then treated with
a hot mixture which includes
candelilla wax from Mexico, paraffin wax, and hydrogenated
natural fats.

My cedar receives six coats of lacquer. Do you know all the
ingredients of lacquer? Who would think that the growers of
castor beans and the refiners of castor oil are a part of it? They
are.

Observe the labeling. That's a him formed by applying heat

6

Why even the
processes by which
the lacquer is made
a beautiful yellow
involve the skills of

more persons
than one can
enumerate.

99

to carbon black mixed with resins. How do you make resins and
what, pray, is carbon black? Why, even the processes by which
the lacquer is made a beautiful yellow involve the skills of
more persons than one can enumerate!

My bit of metal — the ferrule — is brass. Think of all the
persons who mine zinc and copper and those who have the skills
to make shiny sheet brass from these products of nature. Those
black rings on my ferrule are black nickel. What is black nickel
and how is it applied? The complete story of why the center of my
ferrule has no black nickel on it would take pages to explain.

Then there's my crowning glory, inelegantly referred to in the
trade as “the plug," the part man uses to erase the errors he makes
with me. An ingredient called “factice" is what does the erasing.
It is a rubber-like product made by reacting rapeseed oil from
the Dutch East Indies [Indonesia] with sulfur chloride. Rubber,
contrary to the common notion, is only for binding purposes.
Then, too, there are numerous vulcanizing and accelerating
agents. The pumice comes from Italy; and the pigment which
gives “the plug" its color is cadmium sulfide.

NO ONE KNOWS

Does anyone wish to
challenge my earlier assertion
that no single person on the face
of this earth knows how to make
me?

Actually, millions of human
beings have had a hand in my
creation, no one of whom even
knows more than a very few of
the others. Now, you may say
that I go too far in relating the
picker of a coffee berry in far-off
Brazil and food growers elsewhere to my creation; that this is an
extreme position. I shall stand by my claim. There isn't a single
person in all these millions, including the president of the pencil

Actually,

millions of human
beings have had a
hand in my creation,
no one of whom
even knows more
than a very few of
the others.

7

company, who contributes more than a tiny infinitesimal bit of
know-how. From the standpoint of know-how the only difference
between the miner of graphite in Ceylon and the logger in Oregon
is in the type of know-how. Neither the miner nor the logger can
be dispensed with, any more than can the chemist at the factory
or the worker in the oil field — paraffin being a by-product of
petroleum.

Here is an astounding fact: Neither the worker in the oil field
nor the chemist nor the digger of graphite or clay nor any who
mans or makes the ships or trains or trucks nor the one who runs
the machine that does the knurling on my bit of metal nor the
president of the company performs his singular task because he
wants me. Each one wants me less, perhaps, than does a child in
the first grade. Indeed, there are some among this vast multitude
who never saw a pencil nor would they know how to use one.
Their motivation is other than me. Perhaps it is something like
this: Each of these millions sees that he can thus exchange his
tiny know-how for the goods and services he needs or wants. I
may or may not be among these items.

NO MASTER MIND

There is a fact still more astounding: The absence of a master
mind, of anyone dictating or forcibly directing these countless
actions which bring me into being. No trace of such a person can
be found. Instead, we find the Invisible Hand at work. This is the
mystery to which I earlier referred.

It has been said that "only God can make a tree/' Why do we
agree with this? Isn't it because we realize that we ourselves could
not make one? Indeed, can we even describe a tree? We cannot,
except in superficial terms. We can say, for instance, that a certain
molecular configuration manifests itself as a tree. But what mind
is there among men that could even record, let alone direct, the
constant changes in molecules that transpire in the life span of a
tree? Such a feat is utterly unthinkable!

I, Pencil, am a complex combination of miracles: a tree,
zinc, copper, graphite, and so on. But to these miracles which

manifest themselves in Nature an even more extraordinary
miracle has been added: the configuration of creative human
energies — millions of tiny know-hows configurating naturally
and spontaneously in response to human necessity and desire
and in the absence of any human masterminding! Since only
God can make a tree, I insist that only God could make me. Man
can no more direct these millions of know-hows to bring me into
being than he can put molecules together to create a tree.

The above is what I meant when writing, “If you can become
aware of the miraculousness which I symbolize, you can help save
the freedom mankind is so unhappily losing/' For, if one is aware
that these know-hows will naturally, yes, automatically, arrange
themselves into creative and productive patterns in response
to human necessity and demand — that is, in the absence of
governmental or any other coercive master-minding — then one
will possess an absolutely essential ingredient for freedom: a
faith in free people. Freedom is impossible without this faith.

Once government has had a monopoly of a creative activity
such, for instance, as the delivery of the mails, most individuals
will believe that the mails could not be efficiently delivered by men
acting freely. And here is the reason: Each one acknowledges that
he himself doesn't know how to do all the things incident to mail
delivery. He also recognizes that no other individual could do it.
These assumptions are correct. No individual possesses enough
know-how to perform a nation's mail delivery any more than any
individual possesses enough know-how to make a pencil. Now,
in the absence of faith in free people — in the unawareness that
millions of tiny know-hows would naturally and miraculously
form and cooperate to satisfy this necessity — the individual
cannot help but reach the erroneous conclusion that mail can be
delivered only by governmental “masterminding."

TESTIMONY GALORE

If I, Pencil, were the only item that could offer testimony
on what men and women can accomplish when free to try, then
those with little faith would have a fair case. However, there is

9

testimony galore; it's all about us and on every hand. Mail delivery
is exceedingly simple when compared, for instance, to the making
of an automobile or a calculating machine or a grain combine or a
milling machine or to tens of thousands of other things. Delivery?
Why, in this area where men have been left free to try, they deliver

the human voice around the world in
less than one second; they deliver an
event visually and in motion to any
person's home when it is happening;
they deliver 150 passengers from
Seattle to Baltimore in less than four
hours; they deliver gas from Texas
to one's range or furnace in New
York at unbelievably low rates and
without subsidy; they deliver each
four pounds of oil from the Persian
Gulf to our Eastern Seaboard — halfway around the world — for
less money than the government charges for delivering a one-
ounce letter across the street!

The lesson I have to teach is this: Leave all creative energies
uninhibited. Merely organize society to act in harmony with this
lesson. Let society's legal apparatus remove all obstacles the best
it can. Permit these creative know-hows freely to flow. Have faith
that free men and women will respond to the Invisible Hand.
This faith will be confirmed. I, Pencil, seemingly simple though
I am, offer the miracle of my creation as testimony that this is a
practical faith, as practical as the sun, the rain, a cedar tree, the
good earth.

The lesson / have
to teach is this:
Leave all creative
energies
uninhibited.

10

Leonard E. Read

Leonard E. Read (1898-1983) established the Foundation for
Economic Education in 1946. For the next 37 years he served as
FEE's president and labored tirelessly to promote and advance
liberty. He was a natural leader who, at a crucial moment in
American history roused the forces defending individual freedom
and private property.

His life is a testament to the power of ideas. As President
Ronald Reagan wrote: "Our nation and her people have been
vastly enriched by his devotion to the cause of freedom, and
generations to come will look to Leonard Read for inspiration."

Read was the author of 29 books and hundreds of essays.
"I, Pencil," his most famous essay, was first published in 1958.
Although a few of the manufacturing details and place names
have changed, the principles endure.

B

*.

\

/

CONTINUE THE CONVERSATION

ONLINE & ON-CAMPUS

f.\ Now available for

FREE download at
eBooks FEE.org/eBooks

jmmg

" L

99 *

WAYS I \

TO ®
LEAVE

LEVIATHAN

Max Borders + Jeffrey A+ Tucker

Ifl

tl?, Pj&rvcjl

LEONARD E. READ

JEFFREY R. TUCKER

■ 1 -

RDVICE
FDR YOUNG,
UNEMPLDYEH
WORKERS

O

RENDERING
un™ CAESAR

WAS JESUS A SOCIALIST?

Lawrence W, Reed

The Foundation for Economic

FEE.ORG |

Education is the premier source for
understanding the humane values
a free society, and the economic,
lepl, and ethical principles that
make it possible. At FEE, students
and their mentors explore
freedom's limitless possibilities
through seminars, classroom
resources, social media, daily
content, and free online courses,
all available at FEE.org.

The Foundation for Economic Education (FEE) is the premier
source for understanding the humane values of a free society,
and the economic, legal, and ethical principles that make it
possible. At FEE, you'll be connected with people worldwide
who share those values and are inspired by the dynamic ideas
of free association, free markets, and a diverse civil society.

Explore freedom's limitless possibilities through seminars,
classroom resources, social media, free online courses, and
exciting daily content at FEE.org. Learn how your creativity
and initiative can result in a prosperous and flourishing life
for yourself and the global community. Whether you are
just beginning to explore entrepreneurship, economics, or
creating value for others or are mentoring others on their
journeys, FEE has everything you need.

FEE is supported by voluntary, tax-deductible contributions
from individuals, foundations, and businesses who believe that
it is vital to cultivate a deep appreciation in every generation
for individual liberty, personal character, and a free economy.
Supporters receive a subscription to our flagship magazine,
the Freeman, also available at FEE.org.

WE INVITE YOU TO ADVANCE LIBERTY WITH US. | VISITFEE.ORG